Us Safety Company manufactures a product used in the Telecom industry. Allen Dakin, the company’s purchasing manager, is currently revising the inventory ordering policy for RJ02, one of the chemicals used in the production process. The chemical is purchased in 10-kilogram case for $81 each and the firm uses 8 640 cases per year. The accountant of the company has shared the following details with Allen:

• Estimated incremental costs of ordering and receiving RJ02 are $190 per order The annual cost of storing RJ02 is $6 per case
• currently, the order size is 320 units The lead time required to receive an order of RJ02 is one month.

Required:

1. If Allen decides to order as per EOQ, how much the company will save in inventory cost per year? Support your answer with calculations.
2. Assuming stable usage of RJ02 each month, determine the reorder point for RJ02
3. Suppose that monthly usage of RJ02 fluctuates between 600 and 800 cases, although annual demand remains constant at 8 640 cases. What level of safety stock should the materials and parts manager keep on hand for RJ02? What is the new reorder point for the chemical?
4. Suppose Allen wants to introduce a contemporary inventory policy - Just in Time. What are the steps Allen must take to implement the new policy? Explain what obstacles Allen may face during the transition period and how to manage these obstacles?